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Credit rating agency warns of further downgrade one day after NDP’s fiscal update

Credit rating agency DBRS Ltd. had some ominous words about a downgrade for Alberta a day after the NDP government issued its most recent fiscal update.
The agency had previously given Alberta a negative outlook and warned of a potential further credit downgrade in the absence of a sustained effort to address the provincial deficit and debt through revenue or cost-cutting measures.

In a report released Thursday on the effect of low energy prices on Alberta, Saskatchewan, and Newfoundland and Labrador, the agency suggested oil prices that have settled just under US$50 a barrel makes that downgrade a near certainty.

“The deterioration in the commodity price outlook increases the likelihood of a negative rating action,” said DBRS, which currently gives Alberta a AA (high) rating.

The report followed Wednesday’s first-quarter fiscal update, in which NDP Finance Minister Joe Ceci announced the deficit would stand pat at $10.5 billion despite a drop in revenue spurred by lower-than-expected oil prices, but only through dipping into the contingency fund and finding new in-year savings.